McLaren Automotive. McLaren Automotive manufactures British sports cars, a number of which are exported to New Zealand for payment in pounds sterling. The distributor sells sports cars in New Zealand for New Zealand dollars. The New Zealand distributor is unable to carry all of the foreign exchange risks, and would not sell MacLoren models unless MacLoren shared some of the foreign exchange risks. MacLaren has agreed that sales for a given model year will initially be priced at a $$base$$ spot rate between the New Zealand dollar and pound sterling set to be the spot mid$-$rate at the beginning of that model year. As long as the actual exchange rate is withinthat base rate, payment will be made in pounds sterling. That is$,$ the New Zealand distributor assumes all foreign exchange risk. However, if the spot rate at the time of shipment falls outside of this range, MacLaren will share equally $($i$.$e$.,50/50)$ the difference between the actual spot rate and the base rate. For the current model year, the base rate is NZ$$1\mathrm{.}6400/.$

$1.$ What are the outside ranges within which the New Zealand importer must pay at the then$-$current spot rate?

$2.$ If MacLoren ships $10$ sports cars to the New Zealand distributor at a time when the spot exchange rate is NZ$$1\mathrm{.}7000/,$ and each car has an invoice cost of $32,000,$ what will be the cost to the distributor in New Zealand dollars? How many pounds will MacLoren receive, and how does this compare with MacLoren$$s expected sales receipt of $32,000$ per car?

$3.$ If MacLoren Automotive ships the same $10$ cars to New Zealand at a time when the spot exchange rate is NZ$$1\mathrm{.}6500/,$ how many New Zealand dollars will the distributor pay? How many pounds will MacLoren Automotive receive?

$4.$ Does a risk$-$sharing agreement such as this shift the currency exposure from one party of the transaction to the other? $5.$ Why is such a risk$-$sharing agreement of benefit to MacLaren? Why is it of benefit to the New Zealand distributor?